What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-06-26 compared with 2025-06-30 · 462 added, 313 removed, 551 unchanged (58% of the section changed)

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Consolidated Statements of Operations for the fiscal years ended March 31, 2026 and 2025

Consolidated Statements of Comprehensive Loss for the fiscal years ended March 31, 2025 and 2024

Consolidated Statements of Comprehensive (Loss) Income for the fiscal years ended March 31, 2026 and 2025

Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2026 and 2025

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We have audited the accompanying consolidated balance sheets of Cineverse Corp.

(the “Company”) as of March 31, 2025 and 2024, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of March 31, 2026 and 2025, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2026 and 2025, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matters do not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition – determination of principal versus agent

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and (iv) testing that the accounting system accurately calculated the amount of revenue to be recorded.

Valuation of Intangible Assets Acquired in Business Combinations and the Related Bargain Purchase Gain

As disclosed in Note 10 to the financial statements, the Company completed two business combinations during the year ended March 31, 2026.

The business combinations were accounted for in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 805, Business Combinations .

Accordingly, the purchase consideration for each acquisition was allocated to the assets acquired and liabilities assumed based on their respective fair values, including acquired intangible assets aggregating to $26.0 million.

For one of the acquisitions, the fair value of the net identifiable assets acquired exceeded the purchase consideration, resulting in the recognition of a bargain purchase gain of $4.25 million.

The Company valued the acquired intangible assets, comprised of trade names and trademarks, customer relationships, software, and the preferred partner medallions, which are preferred delivery partner relationships with major downstream streaming and digital distribution platforms, at fair value as of the respective acquisition dates using income approaches.

The methods used to estimate fair value required management to make significant estimates and assumptions related to forecasts of future cash flows, revenue growth rates, discount rates, royalty rates, and customer attrition rates.

We identified the valuation of intangible assets acquired in business combinations, and the related bargain purchase gain, as a critical audit matter due to the complexity and significant estimation uncertainty in determining the fair values of the identified intangible assets.

This estimation uncertainty was driven primarily by the sensitivity of the respective fair values to underlying assumptions about the future performance of the acquired businesses and by the limited historical data on which to base those assumptions.

The bargain purchase gain also required a high degree of judgement, as the recognition and measurement of the gain was directly dependent on the fair values assigned to the intangible assets and other acquired assets and assumed liabilities, and required management to reassess whether all assets acquired and liabilities assumed had been identified and appropriately measured.

As such, there was a high degree of auditor judgement and subjectivity, and significant audit effort was required in performing procedures to evaluate management’s conclusions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) obtaining an understanding of the Company’s process and controls over accounting for business combinations, including process and controls over the development of the significant assumptions used to value the acquired intangible assets and controls over management's reassessment supporting recognition of the bargain purchase gain;

(ii) with the assistance of professionals with specialized skill and knowledge, we evaluated the appropriateness of the valuation models and the reasonableness of the significant assumptions, including projected revenues, discount rates, royalty rates, and attrition rates, by comparing them to historical results and to industry and market data;

and (iii) we tested the completeness, accuracy,

and relevance of the underlying data used in the models, and assessed whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

/s/ EisnerAmper LLP

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Accounts receivable, net of allowance for credit losses of $ 622 and $ 307 , respectively

Employee retention tax credit

Content advances, net of allowance $ 4,818 and $ 6,260 respectively

Content advances, net allowance of $ 5,503 and $ 4,818 , respectively

Other current assets

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Line of credit, net

Current portion of deferred consideration on purchase of business

Earnout consideration on purchase of business

Deferred consideration

Current portion of operating lease liabilities

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Total current liabilities

Deferred consideration on purchase of business, net of current portion

Operating lease liabilities, net of current portion

Convertible notes payable, net

Earnout consideration

Other long-term liabilities

Total Liabilities

Commitments and contingencies (see Note 8)

Commitments and contingencies (Note 8)

Stockholders’ Equity

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20 shares authorized;

7 shares issued and 7 shares outstanding at March 31, 2025 and 2024

7 shares issued and 7 shares outstanding at March 31, 2026 and 2025, respectively

Common stock, $ 0.001 par value;

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Selling, general and administrative

Change in fair value of acquisition-related deferred consideration

Depreciation and amortization

Goodwill impairment

Total operating expenses

Operating income (loss)

Operating (loss) income

Interest expense

Gain (loss) from equity investment in Metaverse

Other expenses, net

Net income (loss) before income taxes

Income tax expense

Net income (loss)

Gain on bargain purchase

Other (expense) income, net

Net (loss) income before income taxes

Income tax benefit (expense)

Net (loss) income

Net income attributable to noncontrolling interest

Net income (loss) attributable to controlling interests

Net (loss) income attributable to controlling interests

Preferred stock dividends

Net income (loss) attributable to common stockholders

Net income (loss) per share attributable to common stockholders:

Net (loss) income attributable to common stockholders

Net (loss) income per share attributable to common stockholders:

Weighted average shares of Common Stock outstanding:

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Cineverse Corp.

CONSOLIDATED STATEMENTS OF COMPREH ENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREH ENSIVE (LOSS) INCOME

(In thousands)

For the Fiscal Year Ended

Net income (loss)

Other comprehensive income (loss):

Net (loss) income

Other comprehensive (loss) income:

Foreign exchange translation

Net income attributable to noncontrolling interest

Comprehensive income (loss)

Comprehensive (loss) income

See accompanying Notes to Consolidated Financial Statements

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Cash flows from operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Net (loss) income

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

Impairment of goodwill

Amortization of debt issuance costs

Gain on bargain purchase

Stock-based compensation

Change in fair value of deferred consideration and earnouts

Changes in fair value of and realized (gains) losses from equity investment in Metaverse

Barter-related non-cash expenses

Capitalized content

Acquisition-related income tax benefit

Fair value adjustment of deferred consideration

Amortization of debt issuance costs

Non-cash interest (income) expense

Allowance for content advances

Barter transactions

Changes in operating assets and liabilities:

Accounts receivable

Other current and long-term assets

Content advances

Other current and long-term assets

Accounts payable, accrued expenses, and other liabilities

Capitalized content

Deferred revenue

Net cash provided by (used in) operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

Purchase of business, net of cash acquired

Expenditures for long-lived assets

Internally developed software capitalization

Sale of equity investment securities

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Payments on line of credit

Proceeds from issuance of convertible notes

Proceeds from common stock warrant exercises

Proceeds from Issuance of Common Stock for public offering

Proceeds from ATM equity issuance, net of fees

Withholding taxes paid on restricted stock units

Debt and equity financing fees

Payment of deferred consideration

At-the-market issuance fees

Payment of earnout consideration

Proceeds from the issuance of a term loan, net of debt issuance costs

Repayment of term loan

Payment of earnout consideration

Cost to acquire treasury shares

Financing fees for line of credit

Proceeds from common stock warrant exercise

Issuance of Class A common stock, net of issuance costs

Net cash (used in) provided by financing activities

Distribution paid on behalf of non-controlling interest

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at beginning of period

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Cash interest paid

Lease liability related payments

Income taxes paid

Noncash investing and financing activities:

Issuance of Class A common stock for payment of employee bonuses

Treasury shares acquired for withholding taxes

Earnout liability settled in stock

Bonus liability settled in stock

Deferred consideration settled in stock

Issuance of Common Stock for settlement of deferred consideration

Accrued dividends on preferred stock

Issuance of Class A common stock for payment of accrued preferred stock dividends

Issuance of Common Stock for payment of accrued preferred stock dividends

See accompanying Notes to Consolidated Financial Statements

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Stock-based compensation

Preferred stock dividends paid in stock

Preferred stock dividends paid in Common Stock

Preferred stock dividends accrued

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Common Stock Warrant Exercise

Fees incurred in connection with ATM offering

Issuance of Class A common stock for earnout commitment

Treasury stock acquired

Issuance of Common Stock in connection with employee equity awards

Treasury shares withheld for employee taxes

Issuance of Common Stock for ATM, net of fees

Issuance of Common Stock for public offering

Distribution paid on behalf of non-controlling interest

Balances as of March 31, 2026

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Stock-based compensation

Preferred stock dividends paid with common stock

Preferred stock dividends paid in Common Stock

Preferred stock dividends accrued

Issuance of common stock for Board of Director compensation

Issuance of Class A common stock in connection with ATM raises, net

Issuance of Class A common stock in connection with direct equity offering

Issuance of Class A common stock in connection employee bonuses

Issuance in connection with the exercise of warrants

Issuance of common stock for acquiree consideration

Common Stock Warrant Exercise

Fees incurred in connection with ATM offering

Issuance of Class A common stock for earnout commitment

Treasury stock in connection with taxes withheld from employees

Issuance of common stock for deferred and earnout consideration

Net (loss) income

Treasury stock acquired

Balances as of March 31, 2025

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The Company has a long legacy in using technology to transform the entertainment industry and played a pioneering role in transitioning movie screens from traditional analog film prints to digital distribution.

Over the past several years, Cineverse has transformed itself from being a digital cinema equipment and physical content distributor to a leading independent streaming company.

In recent years, Cineverse has transformed itself into a leading technology and independent streaming company.

Financial Condition and Liquidity

As of March 31, 2026, the Company has an accumulated deficit of $ 510.1 million.

For the year ended March 31, 2025, the Company had a net income attributable to common shareholders of $ 3.2 million .

The Company had positive working capital of $ 3.6 million, n et cash generated from operations for the year ended March 31, 2025 was $ 17.4 million.

For the year ended March 31, 2026, the Company had a net loss attributable to common shareholders of $( 9.2 ) million.

The Company had negative working capital of $( 12.2 ) million, net cash used in operations for the year ended March 31, 2026 was $ 26.5 million.

The Company has had a history of generating net losses and may continue to generate net losses for the foreseeable future.

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025 , with East West Bank ("EWB") providing for a $ 12.5 million Line of Credit Facility and expandable to $ 15.0 million, guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

The Line of Credit Facility bears interest at a rate equal to 1.25 % above the prime rate , equal to 8.75 % as of March 31, 2025.

The Line of Credit Facility matures on April 8, 2028 .

The Company is party to a Loan, Guaranty, and Security Agreement, as amended on April 8, 2025 , with East West Bank (the "Line of Credit Facility") currently provides for borrowings of up to $ 12.5 million guaranteed by substantially all of our material subsidiaries and secured by substantially all of our and our subsidiaries’ assets.

The facility includes provisions that allow for an increase in total borrowing capacity up to $ 15.0 million, subject to lender approval.

Our capital requirements will depend on many factors, and we may need to use existing capital resources and/or undertake equity or debt offerings, if necessary and opportunistically available, for further capital needs.

Management's plans with respect to the Company's recurring net losses and net operating cash outflows also include but are not limited to our effort in increasing revenue from existing services as well as offering new services, which may result in additional income from operations.

Should management be unsuccessful in executing these plans, additional capital resources will be necessary.

There can be no assurance that resources under our Line of Credit Facility or from additional debt or equity resources will be available on acceptable terms, if at all.

We believe our cash and cash equivalents and availability under our Line of Credit Facility as of March 31, 2026 will be sufficient to support our operations for at least twelve months from the filing of this report.

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Certain columns and rows may not add due to rounded numbers.

We own an 85 % interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

As of March 31, 2026, we owned an 85 % interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

We evaluated the investment under the voting interest entity model and determined that the entity should be consolidated as we have a controlling financial interest in the entity through our ownership of outstanding voting shares, and that other equity holders do not have substantive voting, participating or liquidation rights.

We record net income or loss attributable to noncontrolling interest in our Consolidated Statements of Operations equal to the proportionate share of outstanding profit interest units retained by the noncontrolling interests.

On May 7, 2026, we acquired the remaining outstanding ownership interests in CONtv from the minority interest holders in exchange for shares of the Company’s Class A common stock and cash payments.

As a result of these transactions, CONtv became a wholly-owned subsidiary of the Company.

SUBSEQUENT EVENTS for further information.

We indirectly own 100 % of the common equity of CDF2 Holdings, LLC (“CDF2 Holdings”), which was created for the purpose of capitalizing on the conversion of the exhibition industry from film to digital technology.

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The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the consolidated financial statements and accompanying notes.

Significant items subject to such estimates and assumptions include revenue recognition, share-based compensation expense, valuation allowance for deferred income taxes, recovery of content advances, goodwill and intangible asset impairments, estimated royalties payable to content partners, and the assessment of amortization lives to intangible assets.

Significant items subject to such estimates and assumptions include revenue recognition, business combination, share-based compensation expense, valuation allowance for deferred income taxes, recovery of content advances, goodwill and intangible asset impairments, estimated royalties payable to content partners, and the assessment of amortization lives to intangible assets.

The Company bases its estimates on historical experience and on various other assumptions that the Company believes to be reasonable under the circumstances.

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Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be “cash equivalents.” We maintain bank accounts with major banks, which from time to time may exceed the Federal Deposit Insurance

Corporation’s insured limits.

We periodically assess the financial condition of the institutions and believe that the risk of any loss is minimal.

Non-monetary Transactions

During the year ended March 31, 2023, the Company entered into a non-monetary transaction for the purchase and sale of content licenses with an unrelated third-party.

No gain or loss was recognized, as the fair value of the content licenses purchased was determined to be $ 1.0 million and recognized within Intangible Assets, Net on our Consolidated Balance Sheets, and will be amortized over its three-year estimated life.

For the years ended March 31, 2025 and 2024, $ 341 thousand of related amortization expense had been recognized in Direct Operating expenses within the Consolidated Statements of Operations.

From time to time, the Company entered into non-monetary transactions for the purchase and sale of content licenses with unrelated third-parties.

The fair value of the content licenses purchased are recognized within Intangible Assets, Net on our Consolidated Balance Sheets and amortized over the estimated useful lives of the respective assets.

As functional intellectual property, the Company recognizes the corresponding revenue at the time of delivery to the recipient.

For the year ended March 31, 2026, $ 0.4 million of barter revenue was recognized.

For the years ended March 31, 2026 and 2025, amortization expense related to such transactions were $ 383 and $ 341 thousand, respectively, recognized within Direct Operating expenses in the Consolidated Statements of Operations.

Accounts Receivable, Net

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We review the composition of accounts receivable and analyze historical credit losses, customer concentrations, customer credit worthiness, current and forecasted economic trends and changes in customer payment patterns to evaluate the adequacy of this allowance.

During the year ended March 31, 2025, the Company had no write-offs of previously reserved accounts receivable and as of March 31, 2025, accrued an allowance for expected credit losses of $ 0.3 million .

During the year ended March 31, 2024, the Company had no write-offs of previously reserved accounts receivable balances and as of March 31, 2024, carried an allowance for credit losses of $ 0.3 million.

Employee Retention Tax Credit

The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") provided an employee retention credit which was a refundable tax credit against certain employment taxes.

The Consolidated Appropriations Act (the "Appropriations Act") extended and expanded the availability of the employee retention credit through December 31, 2021.

The Appropriations Act amended the employee retention credit to be equal to 70 % of qualified wages paid to employees during the 2021 fiscal year.

The Company qualified for the employee retention credit beginning in June 2020 for qualified wages through September 2021 and filed a cash refund claim during the fiscal year ended March 31, 2023.

As of March 31, 2025 and 2024, the tax credit receivable of $ 79 thousand and $ 1.7 million, respectively, has been included in the Employee retention tax credit line ("ERTC") on the Company's Consolidated Balance Sheet.

The Company received notification during the second quarter of fiscal year 2024 that its ERTC claim was under examination with the Internal Revenue Service ("IRS").

In April 2024, the Company received a letter from the IRS indicating that its claim had been accepted and $ 1.7 million was received in June 2024.

Credit Losses

We maintain reserves for expected credit losses on accounts receivable.

We review the composition of accounts receivable and analyze historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

We recognize accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that we recognize revenue from a sale.

Reserves for product returns and other allowances are variable consideration as part of the transaction price.

If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

A summary of the movements of our allowances for credit losses as of March 31, 2026

and March 31, 2025 (in thousands) :

Allowance for credit losses at the beginning of the year

Increase in estimated provision

Allowance for credit losses as at March 31, 2026

Allowance for credit losses at the beginning of the year

Increase in estimated provision

Allowance for credit losses as at March 31, 2025

Content Advances

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Amounts estimated to be recoverable in more than 12 months are classified as long-term and presented within content advances, net of current portion, which were $ 8.2 million and $ 4.1 million as of March 31, 2026 and 2025, respectively.

ended March 31, 2025 and 2024, the Company recorded recoveries in the provision for content advances of $ 0.9 million and $ 0.5 million, respectively.

For the year ended March 31, 2026 and 2025, the Company recorded an increase to the provision for content advances of $ 0.7 million and $ 0.9 million, respectively.

Property and Equipment, Net

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We capitalize costs associated with software developed or obtained for internal use when the preliminary project stage is completed, and it is determined that the software will provide significantly enhanced capabilities and modifications.

These capitalized costs are included in property and equipment and include external direct cost of services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects.

These capitalized costs are included in property and equipment and include external direct cost of

services procured in developing or obtaining internal-use software and personnel and related expenses for employees who are directly associated with, and who devote time to internal-use software projects.

Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended use.

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Post-configuration training and maintenance costs are expensed as incurred.

Please see Recently Issued Accounting Pronouncements for further consideration of the Company’s assessment of ASU 2025-06 " Intangibles:

Goodwill and Other Internal-Use Software - Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40) ".

Intangible Assets, Net

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For intangible assets that have finite lives, the assets are amortized using the straight-line method over the estimated useful lives of the related assets.

During both of the years ended March 31, 2025 and 2024 , we did no t record any impairment.

During the years ended March 31, 2026 and 2025 , we did no t record any impairment.

Amortization expense is recorded using the straight-line method over the estimated useful lives of the respective assets as follows:

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Advertiser Relationships and Channel

Preferred Partner Medallions

10 – 12 years

Capitalized Content

Supplier Agreements

The Company’s intangible assets include the following (in thousands):

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Customer Relationships

Tradenames, Trademarks and Patents

Capitalized Content

Preferred Partner Medallions

Tradenames, Trademarks and Patents

Total Intangible Assets

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There were no impairment charges recorded for long-lived and finite-lived intangible assets during the twelve months ended March 31, 2026 and 2025 .

Business Combinations

The Company accounts for business combinations in accordance with ASC 805, Business Combinations, using the acquisition method of accounting.

Under this method, the Company recognizes and measures the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at their estimated fair values as of the acquisition date.

The total consideration transferred is allocated to the identifiable assets acquired and liabilities assumed based on their respective fair values.

The excess of the purchase price over the fair value of net identifiable assets acquired is recorded as goodwill.

Please see the Goodwill policy separately outlined below within this footnote.

In certain circumstances, such as a forced sale or bankruptcy of the acquiree, the fair value of the identifiable net assets acquired exceeds the total consideration transferred in a business combination, resulting in a bargain purchase gain.

The Company recognizes bargain purchase gains in earnings as of the acquisition date.

Goodwill is the excess of the purchase price paid over the fair value of the net assets of an acquired business.

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Inherent in the fair value determination for each reporting unit are certain judgments and estimates relating to future cash flows, including management’s interpretation of current economic indicators and market conditions, and assumptions about our strategic plans with regard to its operations.

To the extent additional information arises,

market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

To the extent additional information arises, market conditions change, or our strategies change, it is possible that the conclusion regarding whether our remaining goodwill is impaired could change and result in future goodwill impairment charges that will have a material effect on our consolidated financial position or results of operations.

The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount or to perform the quantitative impairment test.

For the year ended March 31, 2025 , the Company did no t recognize any goodwill impairment losses.

For the twelve months ended March 31, 2024 , the Company recognized a goodwill impairment loss of $ 14.0 million.

The Company considered the sustained decrease in its share price to be a goodwill impairment indicator and determined that it would be appropriate to proceed with a quantitative test.

Primarily utilizing a market-multiple approach, which took into account the sustained decrease in share price, the Company determined that goodwill impairment of $ 14.0 million would be recognized.

For the year ended March 31, 2026 and 2025, the Company did no t recognize any goodwill impairment losses.

Gross amounts of goodwill and accumulated impairment charges that we have recorded are as follows:

(In thousands)

Goodwill at March 31, 2025

Goodwill from business combinations (Note 10)

Goodwill at March 31, 2026

Fair Value Measurements

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• Level 3 – significant unobservable inputs (including our own assumptions in determining the fair value of investments)

The table below summarizes the levels of fair value measurements of the Company’s financial assets and liabilities as of March 31, 2025 and 2024:

As of March 31, 2025

Equity investment in Metaverse, at fair value

Current portion of earnout consideration on purchase of a business

The table below summarizes the levels of fair value measurements of the Company’s financial assets and liabilities as of March 31, 2026 (in thousands):

As of March 31, 2026

Equity investment in Metaverse, at fair value

Current portion of earnout consideration on purchase of a business

Equity Investment in Metaverse

On February 14, 2020, the Company acquired an approximate 11.5 % interest in A Metaverse Company (“Metaverse”), a publicly traded Chinese entertainment company, formerly Starrise Media Holdings Limited, whose ordinary shares are listed on the Stock Exchange of Hong Kong.

The Company acquired such interest as a strategic investment and in a private transaction from a shareholder of Metaverse that is related to certain of our shareholders.

On April 10, 2020, the Company purchased an additional 15 % interest in Metaverse in a private transaction from shareholders of Metaverse that are affiliated with the then-major shareholder of the Company.

During the year ended March 31, 2024, the Company sold 221 million of its original 362 million shares held as of March 31, 2023, which resulted in a realized loss of $ 0.3 thousand during the year ended March 31, 2024.

The resumption of active trading status represented renewed availability of quoted, unadjusted prices in active markets for identical assets, upon which the Company can execute a sale and readily access pricing information at the measurement date.

Accordingly, the Company has presented the fair value of its Metaverse shares held as of March 31, 2024 within the Level 1 grouping.

The fair value of the shares held as of March 31, 2024 was $ 0.4 million, with associated losses of $ 4.3 million recognized during the fiscal year ended March 31, 2024.

As a result of the decrease in ownership of its investment in Metaverse from its sale of shares, along with a corresponding decrease in influence, the Company no longer accounts for its investment in Metaverse under the equity method and instead follows the guidance for equity securities for which the equity method is no longer appropriate under ASC 321, Investments - Equity Securities, and accordingly, the Company measures its investment at fair value, with changes in the value of securities held recognized in earnings.

We have fully divested our remaining 142 million s hares in Metaverse as of March 31, 2025, resulting in a gain of $ 0.2 million in fiscal year 2025.

Earnout consideration on purchase of business

The Company estimated the fair value of its earnout liability using contractual inputs from the related business combination, which established specific fiscal year revenue growth, profitability and EBITDA targets.

Prior to the completion of the earnout period at the end of fiscal year 2024, the Company utilized the most up to date forecast to estimate the outcome against these targets to determine the ultimate estimated payout.

The amounts recognized are not discounted.

During the year ended March 31, 2024, the final year of the earnout measurement period, the Company estimated a $ 612 thousand decrease in its earnout liability, issued $ 392 thousand worth of equity to settle its liability, made cash payments of $ 291 thousand, and incurred interest of $ 29 thousand.

During the year ended March 31, 2025 , the Company made its final earnout payments of $ 680 thousand, reducing the earnout liability to $ 0 .

The earnout payment was comprised of $ 590 in cash and $ 90 in equity ( 108 thousand shares of the Company's Common Stock).

Deferred consideration

Earnout consideration

Deferred Consideration

The Company initially recognizes liabilities related to Deferred Consideration from business combinations at fair value at the time of acquisition and subsequently recognizes interest expense related to accretion in advance of the ultimate settlement of these liabilities.

Amounts due within 12 months under the terms of the agreements are classified as current within the Consolidated Balance Sheets.

In connection with the acquisitions of FoundationTV ("FTV"), Digital Media Rights ("DMR"), Giant Worldwide and IndiCue, the Company recorded liabilities related to deferred consideration.

These payments are fixed in nature and are due to the sellers of the respective businesses.

The deferred consideration related to the acquisition of DMR was payable in either shares of Common Stock or cash, at the Company's discretion and subject to certain conditions.

During the year ended March 31, 2026, the final payment of $ 2.4 million was made through the issua nce of 677 thousand shares of Common Stock.

The deferred consideration related to the Giant Worldwide acquisition is payable in quarterly cash installments of $ 0.4 million which commenced on the 3-month anniversary of the Closing Date in April 2026.

As of March 31, 2026, the fair value of this liability is $ 1.6 million dollars in the Consolidated Balance Sheet.

The deferred consideration associated with the IndiCue acquisition was determined based on a value of approximately $ 11.3 million at the time of closing and is due within one year of the acquisition date.

Pursuant to the terms of the acquisition agreement, the Company may settle such obligations in cash or shares of the Company’s common stock, at its discretion.

The Company has elected the fair value option under ASC 825, Financial Instruments.

As of March 31, 2026, the fair value of this liability is $ 12.2 million dollars in the Consolidated Balance Sheet.

Earnout Consideration

The Company estimated the fair value of its earnout liabilities using both contractual and Level 3 inputs from the related business combination.

The specific financial targets required for payment are defined in from the IndiCue purchase agreement.

The Company also utilizes Level 3 inputs, including the most up to date forecast at each reporting date to estimate the outcome against these targets to determine the ultimate estimated payout, discounted by a rate reflecting the Company’s estimate of a market borrowing rate and incremental spread for similar subordinated obligations.

During the fiscal year ended March 31, 2026, the Company acquired IndiCue Inc ("IndiCue") and as a part of the purchase consideration, may be required to pay up to $ 18.0 million in earnout payments over the first three fiscal years following the acquisition, contingent upon the achievement of specified rev enue and gross margin targets.

The earnout payments will be payable in cash or shares of Common Stock under certain conditions.

There were no assets and liabilities carried at fair value as of March 31, 2025.

Asset Acquisitions

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As of March 31,

Accrued acquisition related liabilities

Accounts payable

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Total Accounts Payable and Accrued Expenses

Deferred Consideration

The Company has recognized liabilities related to deferred consideration arrangements related to the acquisition of FoundationTV ("FTV") and Digital Media Rights ("DMR").

These payments are fixed in nature and are due to the sellers of the respective businesses.

The Company initially recognized the liability at fair value at the time of acquisition and has since recognized interest expense related to accretion in advance of the ultimate settlement of these liabilities.

Amounts due within 12 months under the terms of the agreements are classified as current within the Consolidated Balance Sheets.

The deferred consideration related to the acquisition of DMR was payable in either shares of Common Stock or cash, at the Company's discretion and subject to certain condit ions.

During the year ended March 31, 2024, 2,284 thousand shares of Common Stock were issued to settle the second deferred consideration payment in the amount of $ 3.0 million.

The final payment of $ 2.4 million was made on April 1, 2025 through the issuance of 677 thousand shares of Common Stock.

The deferred consideration related to the acquisition of FTV is payable in cash and up to 25 % in shares of Common Stock, at the Company's discretion, and subject to certain conditions.

The final payment of $ 0.5 million is due in June 2025.

Disaggregation of Revenue

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Base distribution

Advertising technology and services

Podcast and other

Media services

Other non-recurring

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Certain revenue recognition estimates may be required for this source at the end of a reporting period when we are not contractually entitled to receive final performance reporting from our partners for an extended period of time.

Base distribution revenue is generated by the Company's physical revenue streams such as DVD's and related supply chain revenue, as well as theatrical revenue.

Base distribution revenue is generated by the Company's physical revenue streams and related supply chain revenue, as well as theatrical revenue.

The Company also has contracts for the theatrical distribution of third-party feature movies and alternative content.

Distribution fee revenue and participation in box office receipts are recognized at the time a feature movie and alternative content are viewed.

Advertising technology revenue is derived from two principal revenue streams:

Ad Network revenue and Ad Serving revenue.

Ad Network revenue is earned through advertising campaigns.

Ad serving software represents instances where clients use the Company’s system as a technology platform for managing and delivering their advertising content across designated media channels.

Media services revenue is derived from quality control, packaging, and localization work performed on behalf of studios for platform distribution.

Podcast and other revenue represents advertising fees earned in support of the Company's podcast programming.

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Depending upon the nature of the agreements with the platform and content providers, the fee rate that we earn varies.

The Company’s performance obligations include the delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, and shipment of DVDs and Blu-ray Discs.

Revenue is recognized at the point in time when the content is available for subscription on the digital platform (the Company’s digital content is considered functional IP), at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer.

Fees from Ad-Network revenue are based on an agreed-to cost per mille (“CPM”) rate, and fees for Media Services are typically specified in purchase orders based on the services requested to be rendered.

The Company’s performance obligations include the shipment of physical goods and delivery of content for transactional, subscription and ad supported/free ad-supported streaming TV (“FAST”) on the digital platforms, delivery of advertising related impressions, and at the time of completion of media services.

Revenue is recognized at the point in time across the Company’s revenue streams.

Specifically, revenue is recognized when the content is available for subscription on the digital platform (the Company’s digital content is considered functional IP), at the time of shipment for physical goods, or point-of-sale for transactional and VOD services as the control over the content or the physical title is transferred to the customer.

The Company considers the delivery of content through various distribution channels to be a single performance obligation.

Ad Network transactions are recognized at the point in time when the billable impression is delivered.

Media services are recognized at the point of delivery.

Base Distribution Revenue from the sale of physical goods is recognized after deducting the reserves for sales returns and other allowances, which are accounted for as variable consideration.

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Shipping and Handling

Shipping and handling costs are incurred to move physical goods (e.g., DVDs and Blu-ray Discs) to customers.

We recognize all shipping and handling costs as an expense in direct operating expenses

because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Credit Losses

We maintain reserves for expected credit losses on accounts receivable.

We recognize accounts receivable, net of an estimated allowance for product returns and customer chargebacks, at the time that we recognize revenue from a sale.

Reserves for product returns and other allowances are variable consideration as part of the transaction price.

If actual future returns and allowances differ from past experience, adjustments to our allowances may be required.

A summary of the movements of our allowances for credit losses as of March 31, 2025

and March 31, 2024 (in thousands) :

Allowance for credit losses at the beginning of the year

Increase in estimated provision

Allowance for credit losses as at March 31, 2025

Allowance for credit losses at the beginning of the year

Increase in estimated provision

Allowance for credit losses as at March 31, 2024

Shipping and handling costs are incurred to move physical goods to customers.

We recognize all shipping and handling costs as an expense in direct operating expenses because we are responsible for delivery of the product to our customers prior to transfer of control to the customer.

Contract Liabilities

We generally record a receivable related to revenue when we have an unconditional right to invoice and receive payment, and we record deferred revenue (contract liability) when cash payments are received or due in advance of our performance, even if amounts are refundable.

Deferred revenue includes amounts related to advances, the sale of DVDs or theatrical releases with future release dates.

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Concentrations

For the fiscal year ended March 31, 2025 , two customers represented 30.2 % and 22.9 % of consolidated revenue, respectively.

For the fiscal year ended March 31, 2024 , one customer represented 26 % of consolidated revenue.

For the fiscal year ended March 31, 2026 , the single largest customer rep resented 21 % of consolidated revenue.

For the fiscal year ended March 31, 2025, one customer represented 30 % and another customer represented 23 % of consolidated revenue, respectively.

Direct Operating Costs

Direct operating costs consist of operating costs such as cost of revenue, fulfillment expenses, shipping costs, property taxes and insurance on systems, royalty and participation expenses, allowance against advances, a nd marketing and direct personnel costs.

Stock-based Compensation

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The Company accounts for income taxes using the asset and liability method.

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax basis.

Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit

carryforwards and for differences between the carrying amounts of existing assets and liabilities and their respective tax basis.

Valuation allowances are established when management is unable to conclude that it is more likely than not that some portion, or all, of the deferred tax asset will ultimately be realized.

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If an uncertain tax position meets the “more-likely-than-not” threshold, the largest amount of tax benefit that is more than 50% likely to be recognized upon ultimate settlement with the taxing authority is recorded.

The Company has no uncertain tax positions.

The Company recorded unrecognized tax benefits of approximately $ 49,000 as of March 31, 2026, related to potential state income tax liabilities arising from non-filing positions.

The Company recognizes interest and penalties on uncertain tax positions as a component of income tax expense.

Recently Issued Accounting Pronouncements

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ASU's not included in the Company's disclosures were assessed and determined to be not applicable and material to the Company's consolidated financial statements or disclosures.

The Company adopted ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, as amended, on April 1, 2024, using the modified retrospective approach.

This amendment includes disclosure of significant segment expenses which are regularly provided to the Company’s Chief Operating Decision

Maker ("CODM") and included within each reported measure of segment profit or loss;

other segment items by reportable segment and a description of its composition;

reportable segment’s profit or loss and assets;

additional measures of segment profit or loss if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance, and the title and position of the entity’s CODM and how the CODM uses the reported measures of segment profit or loss in assessing segment performance and determining resource allocation.

Such disclosures apply to entities with a single reportable segment.

These amendments were effective for the Company in its consolidated financial statements for the year ended March 31, 2025 and apply retrospectively to all prior periods using the significant segment expense categories identified.

The impact of the amendments in this update was not material to the Company’s consolidated financial position and results of operations, as the requirements impact only segment reporting disclosures in the footnotes to the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740)—Improvements to Income Tax Disclosures" On an annual basis, this update requires the disclosure of specific tax categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold.

The amendments are effective for annual periods beginning after December 15, 2024.

Prospective and retrospective adoption is permitted.

The Company is still evaluating its method of adoption and assessing the impact of ASU 2023-09 on the disclosures within its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220) ", requiring all public business entities to provide additional disclosure of the nature of expenses included in the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and for interim reporting periods beginning after December 15, 2027, on a prospective basis, with early adoption permitted.

The Company is currently evaluating the impact on our financial statement disclosures.

In July 2025, the FASB issued ASU 2025-05, “ Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326) " aiming to simplify the estimation of credit losses on accounts receivable and contract assets arising from transactions accounted for under ASC 606, “Revenue from Contracts with Customers,” by providing companies an option to assume that the conditions as of the balance sheet date will remain unchanged for the remaining life of these assets while estimating expected credit losses.

The standard is effective for all entities for annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of this pronouncement on its consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06 " Intangibles:

Goodwill and Other Internal-Use Software - Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40) " to modernize the accounting for software costs under, Intangible:

Goodwill and Other Internal-Use Software (referred to as “internal-use software”).

Upon adoption, we will be required to account for internal-use software under the updated capitalization criteria.

The standard is effective for annual periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently assessing adoption timing and the method of adoption.

Effective April 1, 2025, the Company adopted ASU 2023-09 , "Improvements to Income Tax Disclosures" , which expanded income tax disclosure requirements, including disaggregation of pretax income (loss) and income tax expense (benefit) by jurisdiction and disclosure of income taxes paid (net of refunds received).

The Company adopted the standard on April 1, 2025 on a retrospective basis.

Accordingly, the tax rate reconciliation disclosures for the year ended March 31, 2025 has been recast to conform to the current year’s presentation.

The adoption affected disclosures only and did not impact the Company’s financial position, results of operations, or cash flows.

SEGMENT INFORMATION

The Company operates as a single reportable segment.

The Company’s CODM, its Chief Executive Officer ("CEO"), reviews financial information on a consolidated basis to make operating decisions, assess financial performance, and allocate resources.

In evaluating performance, the CODM primarily assesses operating income (loss) and net income (loss), as reported on the consolidated statement of operations and regularly reviews certain significant expense categories, including royalty expense;

The Company’s chief operating decision maker ("CODM"), its Chief Executive Officer , reviews financial information on a consolidated basis to make operating decisions, assess financial performance, and allocate resources.

In evaluating performance, the CODM primarily assesses operating (loss) income and net (loss) income, as reported on the consolidated statement of operations and regularly reviews certain significant expense categories, including royalty expense;

license, participation and technology costs;

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Other general and administrative

Impairment of goodwill

Change in fair value of acquisition-related deferred consideration

Total operating expenses

Operating income (loss)

Operating (loss) income

Interest expense

Gain on bargain purchase

Other income (expense)

Income (loss) before income taxes

Net (loss) income before income taxes

Provision for income taxes

Net income (loss)

Net (loss) income

OTHER INTERESTS

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CDF2 Holdings assists its customers in procuring the equipment necessary to convert their systems to digital technology by providing financing, equipment, installation and related ongoing services.

CDF2 Holdings is a Variable Interest Entity (“VIE”), as defined in ASC 810, Consolidation.

CDF2 Holdings is a VIE, as defined in ASC 810, Consolidation.

ASC 810 requires the consolidation of VIEs by an entity that has a controlling financial interest in the VIE which entity is thereby defined as the primary beneficiary of the VIE.

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Such accounts receivable was $ 0.0 million and $ 0.0 million as of March 31, 2026 and 2025, respectively, which are included in accounts receivable, net on the accompanying Consolidated Balance Sheets.

The accompanying Consolidated Statements of Operation s include $ 0.0 million and $ 0.2 million of digital cinema servicing revenue from CDF2 Holdings for the year ended March 31, 2025 and 2024, respectively.

The accompanying Consolidated Statements of Operations include $ 0.0 million and $ 0.0 million of digital cinema servicing revenue from CDF2 Holdings for the year ended March 31, 2026 and 2025, respectively.

Total stockholders’ deficit of CDF2 Holdings as of March 31, 2026 and 2025 was $ 59.2 million and $ 59.2 million, respectively.

We have no obligation to fund the operating loss or the stockholders’ deficit beyond our initial investment of $ 2.0 million and, accordingly, our investment in CDF2 Holdings as of March 31, 2026 and 2025 is carried at $ 0 .

We own an 85 % interest in CON TV, LLC ("CONtv"), a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

As of March 31, 2026, we owned an 85 % interest in CONtv, a worldwide digital network that creates original content, and sells and distributes on-demand digital content on the Internet and other consumer digital distribution platforms, such as gaming consoles, set-top boxes, handsets, and tablets.

CONtv is consolidated in our consolidated financial statements with the 15 % minority interest presented as a non-controlling interest.

On May 7, 2026, we acquired the remaining outstanding ownership interests in CONtv from the minority interest holders in exchange for shares of the Company’s Class A common stock and cash payments.

As a result of these transactions, CONtv became a wholly-owned subsidiary of the Company.

On March 15, 2022, the Company entered into a stock purchase agreement with Roundtable Entertainment Holdings, Inc.

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The Company paid the purchase price for the Roundtable Securities by issuing 16 thousand shares of Common Stock to Roundtable, after taking into account the June 2023 reverse stock split (further described in the Stockholders' Equity footnote).

The Company recorded $ 0.2 million for the purchase of the Roundtable Securities which is included in other long-term assets on the accompanying Consolidated Balance Sheets.

The Company recorded $ 0.2 million for the purchase of the Roundtable Securities which is included in other long-term assets on the accompany ing Consolidated Balance Sheets.

The investment in the Roundtable Securities was made in connection with a proposed collaboration with Roundtable regarding production and distribution of streaming content including the launch of high profile branded enthusiast streaming channels.

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Our President and Chief Strategy Officer is on the Roundtable Board of Directors.

Line of Credit Facility

The facility includes provisions that allow for an increase in total borrowing capacity up to $ 15.0 million, subject to lender approval.

Under the Line of Credit Facility, the Company is subject to certain financial and non-financial covenants which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand and to report financial information to our lender on a periodic basis.

In anticipation of the acquisitions the company received a covenant holiday from East West Bank through the fourth quarter effective January 1, 2026 through March 31, 2026.

As of March 31, 2026 and 2025, $ 9.4 and $ 0 million was outstanding on the Line of Credit Facility, respectively and there are unamortized issuance costs of $ 124 thousand and $ 98 thousand, respectively, included in other long-term assets on our Consolidated Balance Sheets.

For the year ended March 31, 2026 and 2025, the Company incurred interest expense of $ 0.5 million and $ 0.6 million respectively, related to the Line of Credit Facility, which bears interest at a rate equal to 1.25 % above the prime rate ( 8.00 % and 8.75 % as of March 31, 2026 and 2025, respectively).

On April 5, 2024, T3 Borrower, a wholly-owned subsidiary of the Company, entered into the T3 Loan Agreement with the T3 Lender.

The T3 Loan Agreement provided for the T3 Loan with a principal amount not to exceed $ 3.7 million, and a maturity date of April 1, 2025 , with a permitted extension of the term for 120 days under certain conditions.

The T3 Loan bore no interest until the maturity date other than an interest advance equal to $ 576 thousand at the closing of the T3 Loan on April 5, 2024.

The interest advance was recorded as a discount on the T3 Loan at inception and was amortized to interest expense and increase the loan amount over its term.

The proceeds under the T3 Loan Agreement were used for the funding under the Company’s distribution arrangements for the film titled Terrifier 3 (the “Film”).

The T3 Loan Agreement contained customary covenants, representation and warranties and events of default.

After the principal of the T3 Loan was paid in full, the T3 Lender was entitled to receive 15 % of all royalties earned by the Company on the Film under its distribution agreements for the Film until the T3 Lender has received in total 1.75 times the full commitment amount of $ 3.7 million ("Participation Interest").

The T3 Loan was secured by a first priority interest in all of T3 Borrower’s assets in connection with the Film, including T3 Borrower's rights, title and interest in the distribution agreements, including the proceeds to the T3 Borrower from the distribution of the Film.

In April 2025, the Company paid the T3 Lender $ 700 thousand in Participation Interest which has been recorded as Interest Expense within the Consolidated Statement of Operations.

The Company entered into a Guaranty Agreement (the "T3 Guaranty Agreement") on April 25, 2024, pursuant to which it guarantees T3 Borrower's obligations under the T3 Loan Agreement (the "Guarantee").

The Guarantee is capped at $ 1.5 million.

During the year ended March 31, 2026, the Company negotiated a reduction to the accrued Participation Interest of $ 375 thousand and made a final payment of $ 944 thousand to the T3 Lender.

The $ 375 thousand reduction to Participation Interest was recorded as a reduction to interest expense in our Consolidated Statement of Operations for the year ended March 31, 2026.

Convertible Notes

On February 12, 2026, the Company issued and sold convertible notes in the aggregate principal amount of $ 13,000,000 (each, a “Note”) to certain lenders (individually, an “Investor” and collectively, the “Investors”) pursuant to those certain note purchase agreements (each, a “Purchase Agreement”), dated February 12, 2026, between the Company and each Investor.

The Notes mature on the earlier to occur of (i) the four-year anniversary of issuance and (ii) an event of default (such date, the “Maturity Date”).

The proceeds from the convertible notes were primarily used to pay the cash purchase consideration for the IndiCue acquisition.

The Notes bear interest at a rate of 9 % per annum payable in cash or, as to a portion, in shares of Common Stock in the holder’s discretion.

At any time after issuance of the Notes, the Investors may convert their Notes, in whole or in part, into shares of Common Stock, in accordance with the terms of the Notes at a conversion price per share of $ 2.00 (the “Conversion Price”), subject to customary adjustments upon any stock split, stock dividend, stock combination, recapitalization or similar events.

The Company can require conversion in tranches of up to approximately 15 % of the original principal amount of the Notes during each of the six-month periods beginning July 1, 2026 and ending December 31, 2028, with any unconverted tranches available on a cumulative basis in future tranches.

The Notes may be prepaid by paying 100 % of the outstanding principal amount, interest on the outstanding principal amount through the earlier of the Maturity Date or the date that is 24 months from the date of prepayment, and warrants (the “Warrants”) to purchase the number of shares of Common Stock into which the principal amount then outstanding would be convertible at the Conversion Price, with such warrants having an exercise price equal to such Conversion Price and a term that ends on the Maturity Date.

The Notes rank junior to secured debt of the Company, including the Line of Credit Facility.

For the fiscal years ended March 31, 2026 and 2025, the Notes are presented net of unamortized debt issuance costs of $ 455 and $ 0 , respectively.

STOCKHOLDERS’ EQUITY

During the fiscal year ended March 31, 2025 , the Company issued 500 thousand shares of Common Stock, relating to preferred stock dividends, Board fees, deferred consideration and earnout commitments, and common stock warrant exercise.

During the fiscal year ended March 31, 2024, the Company issued 6.4 million shares of Common Stock, through a registered direct offering, ATM sales, preferred stock dividends, issuance for shares for employee bonuses net of shares withheld for taxes, exercise of pre-funded warrants, Board fees, deferred consideration and earnout commitments.

Direct Offering

In June 2023, the Company sold in a public offering an aggregate of 2,150,000 shares of the Company’s Class A common stock, pre-funded warrants to purchase up to 516,667 shares of Common Stock, and common warrants to purchase up to 2,666,667 shares of Common Stock at an effective combined purchase price of $ 3.00 per share and related Common Warrant, for aggregate gross proceeds of approximately $ 8.0 million, before deducting placement agents fees and offering expenses payable by the Company.

The purchase price of each Pre-Funded Warrant and related Common Warrant was equal to the Purchase Price less the $ 0.001 per share exercise price of each Pre-Funded Warrant.

All pre-funded and common warrants were issued as immediately exercisable.

All pre-funded warrants were subsequently exercised in July 2023 for total proceeds of $ 0.5 thousand.

All common warrants were issued as immediately exercisable and 2,654 thousand common warrants remain outstanding as of March 31, 2025.

During the fiscal year ended March 31, 2026, the Company issued 5.7 million shares of Common Stock.

The shares issued consisted of 1.9 million shares issued upon common stock warrant exercises, 1.7 million shares issued in an underwritten public offering, 677 thousand shares issued as deferred acquisition consideration, 422 thousand shares, net of treasury shares, related to employee equity awards, 397 thousand shares issued through the Company's ATM program, 114 thousand shares issued in connection with preferred stock dividends, and 97 thousand shares issued to members of the Board of Directors.

During the fiscal year ended March 31, 2025, the Company issued 500 thousand shares of Common Stock, relating to preferred stock dividends, Board fees, deferred consideration and earnout commitments, and stock warrant exercise.

Public Offering

In February 2026, the Company sold in a public offering an aggregate of 1,725,000 shares (the “Offered Shares”) of the Company’s Common Stock, at a purchase price of $ 2.00 per share, for aggregate gross proceeds of approximately $ 3.5 million, before deducting underwriting commissions and expenses payable by the Company.

The net proceeds to the Company from the sale of the Shares, after deducting the fees of the underwriter but before paying the Company’s estimated Offering expenses, was $ 3.1 million .

ATM Sales Agreement

In July 2020, we entered into an At-the-Market sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) and B.

Riley FBR, Inc.

Riley” and, together with A.G.P., the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock at the market prices prevailing on Nasdaq at the time of the sale of such shares.

The Company is not obligated to sell any shares under the ATM Sales Agreement.

Any sales of shares made under the ATM Sales Agreement will be made pursuant to the Company's Registration Statement on Form S-3 (Registration No.

333-239710), for an aggregate offering price of up to $ 30 million.

The ATM Sales Agreement terminated on January 6, 2024 .

For the year ended March 31, 2024, the Company sold 177 thousand shares for $ 1.1 million in net proceeds, respectively, after deduction of commissions and fees.

On May 3, 2024, Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners and The Benchmark Company, LLC (collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of its Class A common stock, par value $ 0.001 per share (the “Common Stock”).

Shares of Common Stock may be offered and sold for an aggregate offering price of up to $ 15 million.

The Sales Agents’ obligations to sell shares under the Sales Agreement are subject to satisfaction of certain conditions, including the continuing effectiveness of the Registration Statement on Form S-3 (Registration No.

On May 3, 2024, the Company entered into a sales agreement (the “ATM Sales Agreement”) with A.G.P./Alliance Global Partners and The Benchmark Company, LLC (collectively, the “Sales Agents”), pursuant to which the Company may offer and sell, from time to time, through the Sales Agents, shares of Common Stock.

Common Stock may be offered and sold for an aggregate offering price of up to $ 15 million.

The Sales Agents’ obligations to sell shares under the ATM Sales Agreement are subject to satisfaction of certain conditions, including the continuing effectiveness of the Registration Statement on Form S-3 (Registration No.

333-273098) (the “Registration Statement”) filed by the Company with the U.S.

Securities and Exchange Commission (the “SEC”) on June 30, 2023 and declared effective by the SEC on January 25, 2024, and other customary closing conditions.

The Company will pay the Sales Agents a commission of 3.00 % of the aggregate gross proceeds from each sale of shares and has agreed to provide the Sales Agents with customary indemnification and contribution rights.

The Company has also agreed to reimburse the Sales Agents for certain specified expenses.

The Company is not obligated to sell any shares under the Sales Agreement and has not sold any shares through the date of this report.

Under the terms of the ATM Sales Agreement, the Sales Agents earn a commission of 3.0 % of the aggregate gross proceeds from each sale of shares and has agreed to provide the Sales Agents with customary indemnification and contribution rights, and the Company also reimburses the Sales Agents for certain specified expenses.

The Company is not obligated to sell any shares under the ATM Sales Agreement.

Any sales of shares made under the ATM Sales agreement will be made pursuant to the effective shelf registration statement.

On June 8, 2026, the aggregate authorized offering price under the ATM Sales Agreement was increased to $ 30 million.

During the year ended March 31, 2026, the Company sold 397 thousand shares for net proceeds of $ 1.0 million , after deduction of commissions and fees, under the ATM Sales Agreement.

Non-Controlling Interest Buyout

Subsequent to March 31, 2026, the Company entered into a Stock Exchange Agreement with holders of CONtv pursuant to which the Company acquired the remaining outstanding ownership interests in CONtv in exchange for shares of the Company’s Class A common stock and cash payments.

As a result of these transactions, CONtv became a wholly-owned subsidiary of the Company.

Common Stock Warrants

A reconciliation of the beginning and ending balances of warrants outstanding is as follows:

Number of Shares

Warrants outstanding as of March 31, 2024

Warrants exercised

Warrants outstanding as of March 31, 2025

Warrants exercised

Warrants outstanding as of March 31, 2026

As of March 31, 2026, warrants outstanding have an exercise price of $ 3.0 and expire on June 16, 2028 .

PREFERRED STOCK

Cumulative dividends in arrears on our outstanding Series A preferred stock were $ 0.1 m illion as of March 31, 2025 and 2024.

For the years ended March 31, 2025 and 2024 , we paid preferred stock dividends in the form of 276 thousand an d 196 tho usand shares of Common Stock, respectively.

The holders of the Company’s Series A Preferred Stock are entitled to receive cumulative dividends from the date of issuance at an annual rate of 10 % of the original issue price.

Such dividends shall be payable in arrears in cash or, at the Company’s option, in shares of Class A common stock, quarterly on the last day of each calendar quarter, while such shares are outstanding.

The Series A Preferred Stock does not have voting rights , conversion rights, or redemption rights, but has liquidation rights up to the original issue price.

Cumulative dividends in arrears on our outstanding Series A preferred stock were $ 0.1 million as of March 31, 2026 and 2025.

For the years ended March 31, 2026 and 2025, we paid preferred stock dividends in the form of 114 thousand and 276 thousand shares of Common Stock, respectively.

Subsequent to March 31, 2026, the Company entered into a Stock Exchange Agreement with a holder of Series A preferred stock, pursuant to which the Company agreed to issue shares of Common Stock in exchange for the holder’s 3.118 shares of Series A preferred stock.

The exchange is being made in five (5) equal tranches, commencing May 1, 2026, and the number of shares of Common Stock issuable in each tranche will be calculated by dividing the value of the shares of shares of preferred stock being exchanged by the 5-day volume weighted average price of the Common Stock ending on the trading day preceding the exchange.

TREASURY STOCK

We have treasury stock, at cost, con sisting of 504 thousand shares and 289 thou sand shares of Common Stock as of March 31, 2025 and 2024, respectively.

We have treasury stock, at cost, consisting of 830 thousand shares and 504 thousand shares of Common Stock as of March 31, 2026 and 2025, respectively.

During the year ended March 31, 2026, the Company retained 326 thousand shares of common stock as treasury stock related to the payment of employee taxes for restricted stock awards issued to employees.

During the year ended March 31, 2025, the Company acquired 215 thousand shares of treasury stock, repurchased through Rule 10b5-1 and 10b-18 trading plans with B.

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Stock Options

Options outstanding and exercisable under the 2000 Plan are as follows:

As of March 31, 2025

Options Outstanding

Weighted Average Remaining Life in Years

Weighted Average Exercise Price

Aggregate Intrinsic Value

As of March 31, 2026, there were no options outstanding and exercisable under the 2000 Plan.

As of March 31, 2025, the options outstanding and exercisable under the 2000 Plan were as follows:

As of March 31, 2025

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Aggregate Intrinsic Value

During the year ended March 31, 2025 and 2024 , 642 options and 9 thousand options expired, respectively.

The remaining outstanding options expire in July 2025.

Stock Appreciation Rights ("SAR")

During the year ended March 31, 2026 and 2025 , 250 and 642 options expired, respectively.

Stock Appreciation Rights ("SARs")

During the year ended March 31, 2026, the Company granted 85 thousand SARs, which were granted under the 2017 Plan.

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Risk-free interest rate

4.51 % - 3.82 %

Exercise price

$ 5.80 -$ 10.43

Market price per share

$ 5.80 -$ 10.43

The weighted average fair value of outstanding grants made during the year ended March 31, 2024, was $ 4.99 per award.

No SARs were issued in the fiscal year ended March 31, 2025.

SARs outstanding under the 2017 Plan, along with the minimum and maximum strike price of each group, are as follows:

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As of March 31, 2026, the compensation cost not yet recognized related to nonvested SARS awards totaled 65 thousand , to be recognized over the weighted average remaining vesting period of 1.2 years.

SARs activity for the year ended March 31, 2025 is as follows (in thousands):

Activity for the year ended March 31, 2026 is as follows (in thousands):

March 31, 2026

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Total SARs Outstanding March 31, 2026

Performance Stock Units ("PSU")

The Company grants performance stock unit ("PSU") awards under the 2017 Plan to employees of the Company that vest upon certain performance goals being achieved.

Performance Stock Units ("PSUs")

The Company has granted PSUs under the 2017 Plan to employees of the Company that vest upon certain performance goals being achieved.

Upon vesting, the award may be settled in shares or cash at the Company's discretion.

There were no PSUs granted, or shares issued upon the settlement of PSUs for the years ended March 31, 2025 and 2024 .

PSUs totalling 20,250 were forfeited during the year ended March 31, 2025.

As of March 31, 2025, there are 25,000 unvested PSUs which will vest upon meeting certain performance goals for the year ended March 31, 2026.

Restricted Stock Awards ("RSA")and Restricted Stock Units ("RSU")

There were no PSUs granted, earned, vested, or settled during the years ended March 31, 2026 and 2025.

During the year ended March 31, 2026, the 25,000 unvested PSUs outstanding as of March 31, 2025 were forfeited upon the expiration of the applicable performance period.

As of March 31, 2026, there were no outstanding unearned or unvested PSUs.

Restricted Stock Awards ("RSAs") and Restricted Stock Units ("RSUs")

During the year ended March 31, 2026, the Company granted RSAs and RSUs to employees under the 2017 Plan.

These RSAs and RSUs have 3 -year vesting periods and are valued at the closing stock price on the date of grant.

Upon vesting, RSUs may be settled in shares or cash at the Company's discretion while RSAs are in shares awards.

As of March 31, 2025, there was $ 804 thousand of unrecognized stock-based compensation expense related to these awards that will be recognized over the remaining vesting period of 25 months.

As of March 31, 2025, there were 1,127,500 unvested RSUs and RSAs outstanding.

Upon vesting, RSUs may be settled in shares or cash at the Company's discretion while RSAs are settled in shares.

As of March 31, 2026, there was $ 3.8 million of unrecognized stock-based compensation expense related to these awards that will be recognized over the remaining vesting period of 22 months.

As of March 31, 2026, there were $3.1 million unvested RSUs and RSAs outstanding.

RSU and RSA activity for the year ended March 31, 2026 is as follows (in thousands):

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Of this stock based compensation expense, there was $ 0.3 million and $ 0.3 million of stock-based compensation expense for the year ended March 31, 2026 and 2025, respectively, related to Board of Director fees.

During the years ended March 31, 2025 and 2024 , the Company issued 74 thousand and 400 thousand restricted shares to non-employee directors, respectively.

During the years ended March 31, 2026 and 2025 , the Company issued 97 thousand and 74 thousand restricted shares, respectively to non-employee directors as compensation for their services.

EARNINGS (LOSS) PER SHARE

Basic net income (loss) per share is computed by dividing the net income (loss) attributable to Common Stockholders, adjusted for by the deemed earnings attributable to participating common warrant holders, by the weighted average number of shares of Common Stock outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) available to Common Stockholders by the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period.

Basic net (loss) income per share is computed by dividing the net (loss) income attributable to Common Stockholders, adjusted for by the deemed earnings attributable to participating common warrant holders, by the weighted average number of shares of Common Stock outstanding during the period.

Diluted net (loss) income per share is computed by dividing the net (loss) income available to Common Stockholders by the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares include restricted stock units, stock options and warrants outstanding during the period and are calculated using the treasury stock method.

Potentially dilutive common shares are excluded from the computations of diluted income (loss) per share if their effect would be anti-dilutive.

Potentially dilutive common shares are excluded from the computations of diluted (loss) income per share if their effect would be anti-dilutive.

A net loss available to Common Stockholders causes all potentially dilutive securities to be anti-dilutive and are not included.

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(in thousands, except shares and per share data)

Net income (loss) attributable to common stockholders and participating common warrant holders

Net (loss) income attributable to common stockholders and participating common warrant holders

earnings attributable to participating common warrant holders

Net income (loss) attributable to common stockholders - basic and diluted

Net (loss) income attributable to common stockholders - basic and diluted

Weighted average shares of common stock - basic

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Earnings per share:

Basic earnings (loss) per share

Basic (loss) earnings per share

Effect of dilutive common stock equivalents

Diluted earnings (loss) per share

Diluted (loss) earnings per share

The following common equivalent shares outstanding at period-end have been excluded from the computation of earnings per share, as their inclusion would have been anti-dilutive:

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Stock appreciation rights

Restricted stock units and awards

Warrants to purchase common stock

Line of Credit Facility

The Line of Credit Facility bears interest at a rate equal to 1.25 % above the prime rate , equal to 8.75 % as of March 31, 2025.

The Line of Credit Facility matures on April 8, 2028 .

As of March 31, 2025 and 2024, $ 0.0 million and $ 6.4 million was outstanding on the Line of Credit Facility, respectively.

Under the Line of Credit Facility, the Company is subject to certain financial and non-financial covenants including terms which require the Company to maintain certain metrics and ratios, maintain certain minimum cash on hand, and to report financial information to our lender on a periodic basis.

As of March 31, 2024, the Company was out of compliance with one of its covenants and received a waiver from EWB in June 2024.

The Company was in compliance with all covenants as of March 31, 2025.

For the year ended March 31, 2025 and 2024, the Company incurred interest expense of $ 0.6 million and $ 0.4 million to EWB related to the Line of Credit Facility, respectively.

On April 5, 2024, T3 Borrower, a wholly-owned subsidiary of the Company, entered into the T3 Loan Agreement with the T3 Lender.

The T3 Loan Agreement provides for the T3 Loan with a principal amount not to exceed $ 3.7 million, and a maturity date of April 1, 2025 , with a permitted extension of the term for 120 days under certain conditions.

The T3 Loan bears no interest until the maturity date other than an interest advance equal to $ 576 thousand at the closing of the T3 Loan on April 5, 2024.

The interest advance was recorded as a discount on the T3 Loan at inception and will be amortized to interest expense and increase the loan amount over its term.

If the T3 Loan is extended as noted above, the T3 Loan will bear interest at a rate of 1.44 % per month.

The T3 Borrower may prepay the obligations under the T3 Loan, in full or in part, without penalty or premium.

The proceeds under the T3 Loan Agreement were used for the funding under the Company’s distribution arrangements for the film titled Terrifier 3 (the “Film”).

The T3 Loan Agreement contains customary covenants, representation and warranties and events of default.

After the principal of the T3 Loan is paid in full, the T3 Lender will be entitled to receive 15 % of all royalties earned by the Company on the Film under its distribution agreements for the Film until the T3 Lender has received in total 1.75 times the full commitment amount of $ 3.7 million ("Participation Interest").

The T3 Loan is secured by a first priority interest in all of T3 Borrower’s assets in connection with the Film, including T3 Borrower's rights, title and interest in the distribution agreements, including the proceeds to the T3 Borrower from the distribution of the Film.

In April 2025, the Company paid the T3 Lender $ 700 thousand in Participation Interest which has been recorded as Interest Expense within the Consolidated Statement of Operations.

The Company entered into a Guaranty Agreement (the "T3 Guaranty Agreement") on April 25, 2024, pursuant to which it guarantees T3 Borrower's obligations under the T3 Loan Agreement (the "Guarantee").

The Guarantee is capped at $ 1.5 million.

Under an Intercreditor Agreement, dated April 5, 2024, by and among EWB, T3 Lender, T3 Borrower and the Company, the Guarantee is subordinated in payment and performance to the Line of Credit Facility.

The T3 Loan was repaid during the fiscal year ended March 31, 2025 .

Convertible notes

COMMITMENTS AND CONTINGENCIES

Operating Leases

Cineverse is a virtual company that operates without domestic operating leases.

The Company previously maintained one domestic operating lease acquired through the acquisition of Digital Media Rights ("DMR"), which was subleased to a third-party.

The Company was not relieved of its original lease obligation and therefore recognized both a lease liability and right-of-use asset as part of the arrangement through the end of the lease term in January 2025 .

The Company recognized $ 0.2 million of sublease income related to this subleasing arrangement for the twelve months ended March 31, 2025.

The Company's two operating leases for its India operations expire in July 2027 .

The Company has three operating leases related to its Cineverse India operations, with expiration dates in July 2027 .

The Company incurred $ 272 thousand and $ 423 thousand in rental expense associated with its operating leases during the years ended March 31, 2026 and 2025, respectively.

The Company did not have any sublease arrangements during the twelve months ended March 31, 2026 and accordingly did no t recognize any sublease income.

The Company recognized $ 0.2 million sublease income related to its subleasing arrangement during the twelve months ended March 31, 2025.

The table below presents the lease-related assets and liabilities recorded on our Consolidated Balance Sheets (in thousands):

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For leases which have a term of twelve months or less and do not contain an option to extend which the Company is

reasonably certain to extend the term, the Company has elected to not apply the recognition provisions of ASC 842

reasonably certain to implement, the Company has elected to not apply the recognition provisions of ASC 842

and recognizes these expenses on a straight-line basis over the term of the agreement.

Since our operating leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at Cineverse's lease commencement date.

Because our operating leases do not provide a readily determinable implicit rate, the Company estimated its incremental borrowing rate to discount the lease payments based on information available at our lease commencement date.

The weighted average discount rate utilized was 4.61 % .

The Company incurred $ 423 thousand and $ 441 thousand in rental expense associated with its operating leases during the years ended March 31, 2025 and 2024, respectively.

In the ordinary course of business, the Company enters into contractual arrangements, from time to time, under which it agrees to commitments with content providers for certain rights which are in production or have not yet been completed, delivered to, and accepted by the Company.

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Certain of these advances are eligible to be recouped through future revenue sharing arrangements.

stage of the Company's projects, the table presented below represents an estimate of the Company's gross project commitments over the next five fiscal years (in thousands):

Based on the stage of the Company's projects, the table presented below represents an estimate of the Company's gross project commitments over the next five fiscal years (in thousands):

Fiscal Year Ended March 31,

Total Project Commitments

We recorded income tax expense of $ 0.1 million and $ 0.0 million from operations for the years ended March 31, 2025 and 2024, respectively.

For the year ended March 31, 2025, the income tax expense of $ 0.1 million was related to U.S.

state and foreign income taxes.

The following table presents the components of income tax expense (benefit) (in thousands):

We recorded income tax expense (benefit) of ($ 2.8 ) million and $ 106 thousand from operations for the years ended March 31, 2026 and 2025, respectively.

For the year ended March 31, 2026, we recorded an income tax (benefit) of ($ 2.8 ) million, which represented a ($ 2.8 ) million release of our valuation allowance related to the IndiCue acquisition, a ($ 75 ) thousand deferred tax (benefit) related to changes in the Indian deferred tax asset, net of $ 25 thousand of current U.S.

state income taxes and $ 43 thousand of current Indian income taxes.

In connection with the acquisition of IndiCue, during the year ended March 31, 2026, we recorded identifiable intangible assets for financial reporting purposes for which there was no corresponding step-up in tax basis because the transaction was treated as a stock acquisition for income tax purposes.

As a result, we recognized an acquisition-date deferred tax liability of approximately $ 2.8 million related to the book-over-tax basis differences in the acquired intangible assets.

The deferred tax liability represented a source of future taxable income and supported the realizability of an equivalent amount of our existing deferred tax assets.

Accordingly, we reduced our valuation allowance by approximately $ 2.8 million and recognized a corresponding deferred income tax benefit in the consolidated statement of operations for the year ended March 31, 2026.

We continue to maintain a valuation allowance against deferred tax assets that are not supported by sufficient positive evidence of realizability.

In July 2025, the One Big Beautiful Bill Act (Public Law 119-21) was enacted.

We recognized the income tax effects of the legislation in the period of enactment in accordance with ASC 740.

The legislation did not have a material impact on our consolidated financial statements for the year ended March 31, 2026.

We will continue to evaluate the impact of the legislation on future periods.

The following table presents the components of (loss) income before income taxes and the related income tax (benefit) expense (in thousands) :

For the Fiscal Year

Ended March 31,

Total federal

Total foreign

Net (loss) income before income taxes

India operations

Total (loss) income before income taxes

Income tax expense:

Net deferred taxes consisted of the following (in thousands) :

As of March 31,

state and local (a)

Total current income tax expense

state and local (b)

Total deferred income tax (benefit) expense

Total income tax (benefit) expense

(a) Taxes in Texas make up the majority of the current U.S.

state and local income tax (benefit) expense.

(b) Taxes in Illinois, California, New York State, Colorado, New Jersey and New York City make up the majority of the deferred U.S.

state and local income tax (benefit) expense.

Income taxes paid (net of refunds received) related to continuing operations are presented on a cash basis and reconcile to cash paid for income taxes in the consolidated statement of cash flows.

Income taxes paid (net of refunds received) were as follows (in thousands) :

For the Fiscal Year

Ended March 31,

Jurisdiction:

state and local:

Total income tax paid

The expected tax expense (benefit) based on the United States statutory federal tax rate is reconciled with actual tax expense (benefit) as follows (in thousands):

For the Year Ended March 31,

Expected U.S.

federal statutory income tax

state and local income taxes, net of federal benefit (c)

federal statutory tax rate difference

Change in U.S.

federal valuation allowance

Nontaxable or nondeductible items:

Nondeductible acquisition-related costs

Change in fair value of contingent consideration

Nondeductible meals and entertainment

Adjustments to deferred tax assets

Income tax (benefit) expense

(c) Taxes in Texas, Illinois, California, New York State, Colorado, New Jersey and New York City make up the majority of the effect of the U.S.

state and local tax category.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities are as follows (in thousands) :

For the Fiscal Year

Ended March 31,

Deferred tax assets:

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Stock-based compensation

Intangible assets

Accrued liabilities

Capital loss carryforward

Capital loss carryforwards

Non-deductible interest expense

Right of use liability

Bad debt reserve

Charitable contribution carryforwards

Total deferred tax assets before valuation allowance

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Right of use asset

Depreciation and amortization

Total deferred tax liabilities

Net deferred tax

Net deferred tax asset

We have provided a valuation allowance to our net deferred tax assets as of March 31, 2026 and 2025.

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In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities.

The decrease in the valuation allowance of $ 10.5 million during the fiscal year ended March 31, 2025 was mainly due to a change in the blended state statutory tax rate.

For the year ended March 31, 2026, our valuation allowance increased by $ 214 thousand, related to the U.S.

federal and state jurisdictions in the amounts of ($ 113 ) thousand and $ 327 thousand, respectively.

For the year ended March 31, 2025, our valuation allowance (decreased) by ($ 10.5 ) million, related to the U.S.

federal and state jurisdictions in the amounts of ($ 1.7 ) million and ($ 8.9 ) million, respectively.

The increase in our valuation allowance during the fiscal year ended March 31, 2026 was mainly due to an increase to our net operating loss carryforward and other deferred tax assets, net of a decrease related to the recording of a deferred tax liability related to the IndiCue acquisition.

The decrease in our valuation allowance during the fiscal year ended March 31, 2025 was mainly due to a change in our blended state statutory tax rate.

The state statutory tax rate decreased due to the utilization of the census-method for purposes of apportioning revenue.

change caused the gross state deferred tax asset to decrease along with the corresponding valuation allowance.

The increase in the valuation allowance of $ 5.9 million during the fiscal year ended March 31, 2024, was mainly due to increases in the deferred tax asset related to the net operating loss carryforward and other temporary differences.

We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.

This change caused our gross state deferred tax asset to decrease along with the corresponding valuation allowance.

As of March 31, 2026, we had federal and state net operating loss carryforwards of approximately $ 80.5 million available in the United States of America (“U.S.”) to reduce future taxable income.

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Similar rules may apply under state tax laws.

On November 1, 2017, we experienced an ownership change with respect to the Bison acquisition.

On November 1, 2017, we experienced an ownership change with

respect to the Bison acquisition.

Accordingly, our ability to utilize our NOL carryforwards attributable to periods prior to November 1, 2017, is subject to substantial limitations.

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The limitations triggered by the September 15, 2020 and November 1, 2022 ownership changes were significantly less substantial than the limitation triggered by the November 1, 2017 ownership change, however.

The differences between the U.S.

statutory federal tax rate and our effective tax rate are as follows:

Ended March 31,

Provision at the U.S.

statutory federal tax rate

State income taxes, net of federal benefit

Change in valuation allowance

Non-deductible expenses

Deferred tax adjustments

Goodwill impairment

Income tax expense (benefit)

We file income tax returns in the U.S.

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For federal income tax purposes, our fiscal 2023 through 2026 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations.

Fiscal 2007 will also remain open for examination as the Company used the fiscal 2007 NOL carryforward this year.

Fiscal 2007 is also open for examination as we used the fiscal 2007 NOL carryforward to offset taxable income generated in fiscal 2025.

state tax purposes, our fiscal 2022 through 2026 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations.

For Indian income tax purposes, our fiscal 2023 through 2026 tax years remain open for examination by the tax authorities.

We evaluated the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements.

ASC 740-10 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that a company has taken or expects to take in its tax return.

For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.

Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.

We recorded an unrecognized tax benefit liability of approximately $ 49 thousand as of March 31, 2026, related to potential state income tax liabilities arising from non-filing positions in connection with our acquisition of IndiCue.

We recognize interest and penalties on uncertain tax positions as a component of income tax expense.

As of March 31, 2025, no liability for unrecognized tax benefits was required to be reported.

A reconciliation of our unrecognized tax positions is as follows (in thousands) :

For the Fiscal Year

Ended March 31,

Balance at beginning of year

Additions based on tax positions related to the current year

Additions for tax positions of prior years

Reductions for tax positions of prior years

State tax positions acquired in business combinations

Reductions due to lapse of statute of limitations

Balance at end of year

BUSINESS COMBINATIONS

A business combination is an acquisition of business.

Business combinations are accounted by allocating the fair value of the purchase price of the assets acquired and liabilities assumed.

For the year ended March 31, 2026, the acquired business contributed revenue of and net income of $ 11.6 million and $ 3.9 million, respectively which are included in the Consolidated Statements of Operations from the acquisition date through March 31, 2026.

IndiCue Acquisition

On February 12, 2026, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) to acquire all of the issued and outstanding equity interests of IndiCue, a CTV monetization and engagement platform.

The acquisition is intended to expand the Company’s technology capabilities and strengthen its advertising and audience engagement offerings within the streaming and connected television ecosystem.

Pursuant to the terms of the Purchase Agreement, the aggregate purchase price, further detailed below was subject to working capital and other customary adjustments, consisting of (i) $ 12.8 million payable in cash at closing and (ii) deferred consideration, payable over 6 to 12 months , in cash or shares of the Company’s Class A common stock, subject to stockholder approval, and earnout payments, in amounts totaling up to $ 18.0 million if certain revenue and gross profit earnout targets are achieved during the first three fiscal years following the Acquisition.

The Purchase Agreement also includes certain restrictive covenants of the Sellers, including noncompetition provisions.

The Company agreed to pay deferred stock consideration one year after Closing (or earlier at the Company's discretion, or after six months upon the seller's request).

Subject to certain conditions, settlement shall be in common stock, with a mechanism requiring additional compensation ("Shortfall Amount") if the Company's share price falls below a designated amount at the time of settlement.

The Shortfall Amount may also be settled in cash or shares at the Company's discretion, subject to certain conditions.

The Company elected the fair value option ("FVO") under ASC 825 to account for the deferred consideration liability.

With this election, the Company remeasures the deferred consideration obligation at fair value at the end of each reporting period.

All changes in fair value are recognized in earnings each reporting period until settlement.

For the year ended March 31, 2026, the Company recognized a $ 1.0 million increase in the fair value of the deferred consideration liability, which is presented as Change in fair value of acquisition-related deferred consideration in the Consolidated Statements of Operations.

The aggregate purchase consideration consisted of the following (in thousands):

Purchase price allocation:

Cash paid to seller

Deferred consideration

Contingent consideration

Total purchase price

Allocated to:

Cash and cash equivalents

Accounts receivables

Other current assets

Intangible assets:

Tradenames, Trademarks and Patents

Customer Relationships

Accounts payable and accrued expenses

Deferred tax liability

Giant Worldwide Acquisition

On January 7, 2026, the Company acquired Giant Worldwide ("Giant"), a provider of audience development, customer acquisition, direct-to-consumer marketing, and media services for leading entertainment brands and studios.

The acquisition brings deep studio relationships, audience development expertise, and performance-driven marketing capabilities to the Matchpoint platform, further enhancing the Company's ability to provide end-to-end technology and media solutions to content owners, distributors, and streaming services.

Pursuant to the terms of the asset purchase agreement, the Company acquired the assets and liabilities of Giant for an aggregate purchase price of $ 1.95 million, payable as (a) $ 0.35 million at closing (the "Closing Date Payment") and (b) $ 1.65 million in four equal installments of $ 0.41 million due at the 3, 6, 9, and 12-month anniversaries of the Closing Date.

The Company acquired Giant as a result of a forced sale through an assignment for the benefit of creditors process.

Following the Company's reassessment of the assets and liabilities acquired, the Company recognized identifiable intangibles of $ 6.2 million for consideration of $ 2.0 million resulting in a bargain purchase gain of $ 4.3 million .

The aggregate purchase consideration consisted of the following (in thousands):

Giant Worldwide

Purchase price allocation:

Cash paid to seller

Deferred consideration

Total purchase price

Allocated to:

Gain on bargain purchase

Intangible assets :

Tradenames, Trademarks and Patents

Preferred partner medallions

Customer Relationships

The following unaudited pro forma financial information presents the combined results of operations of the Company, IndiCue as if the acquisitions had occurred on April 1, 2024 (in thousands):

Net (loss) income

Giant Worldwide is excluded from the table above due to impracticality reasons, as the Company was unable to obtain the requisite financial records for results pre-acquisition.

SUBSEQUENT EVENTS

EWB Line of Credit Expansion

On April 8, 2025, the Company entered into a Second Amended and Restated Loan, Guaranty and Security Agreement, by and between the Company, EWB and the Guarantors named therein, which are certain subsidiaries of the Company (the “Loan Agreement”).

The Loan Agreement amended and restated the prior amended and restated loan, guaranty and security agreement, which was entered into on September 15, 2022 (and amended from time to time, the “Prior Loan Agreement”).

The Loan Agreement provides for a credit facility (the “Credit Facility”)

consisting of a maximum of $ 12,500,000 in revolving loans at any one time outstanding, which principal amount may be increased to $ 15,000,000 at the Company’s request and at EWB’s discretion, and having a maturity date of April 8, 2028 .

Advances under the Credit Facility will bear interest on the outstanding daily balance at 125 basis points ( 1.25 %) above the Prime Rate (as defined in the Loan Agreement).

The proceeds from the Credit Facility will be used for the repayment at closing of expenses incurred in connection with the Prior Loan Agreement;

payment of interest, legal fees and bank fees;

investment, participation, acquisition and /or production of upcoming film/TV projects;

and working capital needs and general corporate purposes.

The Loan Agreement contains customary covenants, representation and warranties and events of default.

DMR Deferred Consideration Stock Settlement

On April 1, 2025, the $ 2.4 million deferred consideration payable to DMR was settled through stock issuance.

As a result, the Company issued 677 thousand shares.

RSA and RSU Vesting

On April 25, 2025, one-third of the RSAs and RSUs granted to certain employees in April 2024 have vested.

As a result, the Company issued 422 thousand shares, net of shares withheld for taxes due.

OTHER INFORMATION

On April 27, 2026, the Company agreed to issue shares of Common Stock in exchange for an aggregate of the holder’s 3.118 shares of Series A Preferred Stock.

The exchange will be made in five (5) equal tranches, and commenced on May 1, 2026.

The number of shares of Common Stock issuable in each tranche is to be calculated by dividing the value of the shares of Series A Preferred Stock being exchanged by the 5-day volume weighted average price ending on the trading day preceding the exchange.

The Company is authorized to issue up to 1,500,000 shares of Common Stock under the Exchange Agreement.

Upon the exchange of each tranche, the shares of Series A Preferred Stock so exchanged will be immediately retired and restored to the status of authorized but unissued preferred stock.

On May 7, 2026, we acquired the remaining outstanding ownership interests in CONtv from the minority interest holders in exchange fo r a total of 380,238 shares of the Common Stock and $ 89 thousand of cash payments.

As a result of these transactions, CONtv became a wholly-owned subsidiary of the Company.

Effective May 1, 2026, the Company entered into a lease for New York, NY office location.

The lease term ends on May 31, 2029 .

The lease contained standard and customary terms which included a security deposit of $ 96 thousand among other amounts due at lease execution date.

The monthly base rent installment escalates over the term of the lease from $ 19 thousand to $ 20 thousand per month at the end of the lease term.

Effective May 1, 2026, the Company entered into a lease for its Burbank, CA office location.

The lease term ends on June 30, 2029 .

The lease contained standard and customary terms which included a security deposit of $ 38 thousand among other amounts due at lease execution date.The monthly rent installment of base rent escalates over the term of the lease from $ 35 thousand, after an initial four month introductory rate, to $ 38 th ousand per month at the end of the lease term.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data